National Union Fire Insurance v. Gulf Island Fabrication, Inc. , 464 F. App'x 278 ( 2012 )

Case: 11-30375 Document: 00511783316 Page: 1 Date Filed: 03/09/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 9, 2012
No. 11-30375 Lyle W. Cayce
Clerk
NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA,
Plaintiff - Appellee,
v.
GULF ISLAND FABRICATION, INC.,
Defendant - Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:09-CV-5884
Before STEWART, CLEMENT, and GRAVES, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellee, National Union Fire Insurance Company of Pittsburgh
(“National Union”), brought this declaratory judgment action against its insured,
Defendant-Appellant, Gulf Island Fabrication, Inc. (“GIF”), after the parties
became involved in an insurance coverage dispute arising out of a $110,000,000
insurance policy. GIF filed counterclaims against National Union and the
parties agreed to file cross-motions for summary judgment in lieu of trial. The
district court granted summary judgment in favor of National Union and against
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 11-30375
GIF, dismissing its counterclaims in all respects. For the reasons stated herein,
we AFFIRM.
I.
On April 29, 2008, an accident occurred at GIF’s heavy steel fabrication
facility in Aransas Pass, Texas. The facility was being operated by Gulf Marine
Fabrication (“GMF”), a subsidiary of GIF, at the time of the accident. Four
cranes were being used to lift a piece of machinery which was being used to
construct an offshore graving dock when one of the cranes (referred to herein as
the “C-1 crane”) side-loaded and collapsed. As a result of the collapse, the cab
of the C-1 crane was crushed, killing the crane operator inside, and the other
three cranes were substantially damaged.
Shortly thereafter, GMF rented substitute cranes while repairs were being
performed on the damaged cranes, ultimately incurring rental expenses in the
approximate amount of $11,117,838. After the accident, GIF began submitting
insurance claims to National Union, which dispatched an independent adjuster,
Ronald Crow of McLain Crow & Associates, to handle GIF’s claims. National
Union authorized Mr. Crow to retain a forensic accountant, Ruben Castilla of
RGL Forensics, to assist in the matter.
The insurance policy between the parties in effect at the time of the
accident contained a coverage period from April 15, 2008 through April 15, 2009,
with a liability limit of $110,000,000. GIF’s insurance broker at this time was
Willis of Louisiana, Inc. (“Willis”). The 2008-09 policy was a renewal of the prior
year’s policy between the parties and contained the following Rental
Reimbursement endorsement:
If a limit of insurance is shown on the Declarations for
Rental Reimbursement, we will reimburse you for
expenses actually incurred for the rental of substitute
equipment when such rental is:
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1. Necessary due to “loss” to scheduled Covered
Property by a covered cause of loss, and
2. Substitute equipment is needed to continue, as
nearly as practicable, the normal operations on
work in progress at the time of “loss,” and
3. When you do not have ideal equipment available
which can perform functions similar to the
Covered Property that sustained the “loss.”
Reimbursement is limited to such expense incurred
during the period commencing seventy-two (72) hours
after the “loss” unless another period is shown on the
Declarations and coverage terminates, regardless of
expiration of the policy, when the exercise of due
diligence and dispatch the lost or damaged Covered
Property has been replaced or repaired or the need for
such equipment no longer exists, which ever first
occurs.
This Company shall not be liable for more than the
actual daily rental expense you incur not to exceed the
limits of liability shown on the Declarations.
The prior year’s policy (April 15, 2007 - April 15, 2008) contained an
identical Rental Reimbursement endorsement except that it also stated on the
declarations page that GIF was entitled to reimbursement for expenses actually
incurred for the rental of substitute equipment up to a $450,000 coverage
sublimit ($15,000 per day for a maximum of 30 days per occurrence). When the
parties renewed the 2007-08 policy for the 2008-09 year, they agreed that there
would be no change to the Rental Reimbursement endorsement, including the
$450,000 sublimit. The language containing the $450,000 sublimit, however,
was mistakenly excluded from the 2008-09 policy.
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The 2008-09 policy also contained a Business Interruption expenses
section with a $16,000,000 coverage sublimit. The Business Interruption
expenses section stated in pertinent part:
Interest and Property Insured
This Company Agrees to insure (subject to the terms,
conditions, limitations and exclusions of this Policy):
This Policy covers against loss directly resulting from
necessary interruption of business caused by
destruction of or damage to real or personal property
covered herein . . . and arising from a peril covered
hereunder and occurring during the term of this
Policy . . .
Limitations
d. Expense Related to Reducing Loss:
This Policy also covers such expenses as are necessarily
incurred for the purpose of reducing loss under this
Policy . . . but in no event shall the aggregate of such
expenses exceed the amount by which the loss
otherwise payable under this Policy is thereby
reduced[.]
Finally, the 2008-09 policy contained an Extra Expense endorsement
with a $5,000,000 coverage sublimit. The Extra Expense endorsement stated
in pertinent part:
The term “Extra Expense,” wherever used in this
Endorsement, is defined as the excess (if any) of the
total cost incurred during the period of restoration
chargeable to the operation of the Insured’s business,
over and above the total cost that would normally have
been incurred to conduct the business during the same
period had no damage or destruction occurred[.]
In April 2008, Mr. Crow made his initial inspection of the damage to the
cranes and continued to work with GIF and Willis through the following months
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to adjust GIF’s claim. Mr. Crow was unable to inspect the C-1 crane because it
had been quarantined by court order due to a pending Occupational Safety and
Health Administration (“OSHA”) investigation related to the death of the crane
operator.
On July 3, 2008 and August 7, 2008, National Union issued Reservation-
of-Rights letters which included instructions to GIF to mitigate any losses
resulting from the accident. On November 8, 2008, on behalf of GIF, Willis
requested that National Union make an advance payment under the policy in
the amount of $4,782,000. Willis then submitted crane replacement costs in the
amount of $3,459,807. In response, Mr. Crow recommended, and National
Union issued, an unallocated payment of $2,000,000. Then, in January 2009,
after further investigation of GIF’s claims, Mr. Crow recommended, and
National Union issued, a second unallocated payment of $4,500,000.
Later that year in the summer of 2009, National Union’s claims handler,
John Roberts, met with Mr. Crow and Mr. Castilla to review the previous
accounting of GIF’s claims. It was during this meeting that National Union
realized that the $450,000 rental reimbursement coverage sublimit had been
mistakenly left off of the 2008-09 policy. Mr. Roberts subsequently notified
Mark Maxwell, the Willis claims consultant handling GIF’s loss, and informed
him of the $450,000 rental reimbursement sublimit and stated that no further
monies were owed by National Union pursuant to the policy on GIF’s claims. In
response, Willis’ National Property Director, David Passman, stated that he
believed that other provisions in the policy could provide coverage for the crane
rental expenses.
National Union then filed a declaratory judgment action in the district
court seeking to reform the 2008-09 policy to include the $450,000 rental
reimbursement coverage sublimit based on the evidence that both parties had
intended to include it in the policy when it was renewed. National Union also
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sought a declaratory judgment that it did not owe GIF any amounts in addition
to what it had already paid GIF under the policy.
After National Union filed for declaratory judgment, no further
adjustments were made to GIF’s claims. Then, in January 2010, the C-1 crane
was released from the court order that had prohibited its inspection. GIF
inspected the C-1 crane and determined that it was a “constructive total loss”
and, in June 2010, requested payment from National Union for the replacement
cost value (“RCV”) of the C-1 crane. National Union refused payment, pointed
to the previous unallocated payments of $6,500,000, and asserted that the
previous payments were to be used by GIF to cover the actual cash value (“ACV”)
of the C-1 crane, not the RCV, which meant that no further payments were owed
by National Union to GIF under the policy.
Consequently, GIF filed a counterclaim to National Union’s declaratory
judgment action alleging that National Union breached its duties under the
insurance contract by refusing to pay the RCV of the C-1 crane and, further, that
National Union was liable for bad faith penalties for its mishandling of GIF’s
claims.
Both parties agreed to file cross-motions for summary judgment in lieu of
trial with any issues not appropriate for summary judgment to proceed to a
bench trial. After a hearing on the cross-motions, the district court held that the
2008-09 policy would be reformed to include the $450,000 sublimit in the Rental
Reimbursement endorsement; that the sublimit limited GIF’s total recovery for
crane rental expenses to $450,000; that the evidence did not support GIF’s claim
of estoppel or detrimental reliance for incurring rental expenses above the
$450,000 sublimit; that the policy only entitled GIF to recover the ACV, not the
RCV, of the C-1 crane; that National Union had fully compensated GIF for all
damages arising out of the April 29, 2008, incident at GIF’s facility in Aransas
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Pass; and that GIF’s counterclaim against National Union for contractual
damages and bad faith penalties was without merit. This appeal ensued.
II.
This court reviews a district court’s grant of summary judgment de novo.
Admiral Ins. Co. v. Ford, 607 F.3d 420, 422 (5th Cir. 2010). Summary judgment
is appropriate when the evidence before the court shows that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a). The moving party bears the initial
burden of demonstrating the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this
burden, the non-moving party must then come forward and establish the specific
material facts in dispute. Matshushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 588 (1986). If the non-moving party is unable to identify anything
in the record to support its claim, summary judgment is appropriate. Stahl v.
Novartis Pharm. Corp., 283 F.3d 254, 263 (5th Cir. 2002).
The interpretation of an insurance contract is reviewed de novo. Admiral
Ins. Co., 607 F.3d at 422. Louisiana law is applicable and provides that an
insurance policy is a contract between the parties and should be construed by
using the general rules of interpretation of contracts set forth in the Louisiana
Civil Code. Cadwallader v. Allstate Ins. Co., 02-1637, (La. 6/27/03), 848 So. 2d
577, 580; La. Ins. Guar. Ass’n v. Interstate Fire & Cas. Co., 93-0911, (La.
1/14/94), 630 So. 2d 759, 763.
Words and phrases used in an insurance policy are to
be construed using their plain, ordinary and generally
prevailing meaning, unless the words have acquired a
technical meaning. An insurance contract, however,
should not be interpreted in an unreasonable or
strained manner under the guise of contractual
interpretation to enlarge or to restrict its provisions
beyond what is reasonably contemplated by
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unambiguous terms or achieve an absurd conclusion.
The rules of construction do not authorize a perversion
of the words or the exercise of inventive powers to
create an ambiguity where none exists or the making of
a new contract when the terms express with sufficient
clearness the parties’ intent.
Ambiguous policy provisions are generally construed
against the insurer and in favor of coverage. Under
this rule of strict construction, equivocal provisions
seeking to narrow an insurer's obligation are strictly
construed against the insurer. That strict construction
principle applies only if the ambiguous policy provision
is susceptible to two or more reasonable interpretations;
for the rule of strict construction to apply, the insurance
policy must be not only susceptible to two or more
interpretations, but each of the alternative
interpretations must be reasonable.
If the policy wording at issue is clear and
unambiguously expresses the parties’ intent, the
insurance contract must be enforced as written. Courts
lack the authority to alter the terms of insurance
contracts under the guise of contractual interpretation
when the policy’s provisions are couched in
unambiguous terms. The determination of whether a
contract is clear or ambiguous is a question of law.
Cadwallader, 848 So. 2d at 580 (internal citations omitted).
GIF concedes that it intended to include the $450,000 coverage sublimit
in the Rental Reimbursement endorsement when the parties renewed the 2008-
09 policy. GIF appeals, however, the district court’s finding that GIF’s recovery
of rental reimbursement expenses is limited to the $450,000 sublimit contained
in the Rental Reimbursement endorsement in the reformed 2008-09 policy.1 GIF
contends that the crane rental expenses are covered by multiple provisions in
1
GIF does not appeal any other part of the district court’s summary judgment.
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the policy, in addition to the Rental Reimbursement endorsement. Namely, GIF
points to the Business Interruption provision ($16,000,000 sublimit) and the
Extra Expenses provision ($5,000,000 sublimit), since the crane rental expenses
were incurred to mitigate GIF’s losses from the accident and to avoid further
business interruption losses. GIF argues that there is no limitation or exclusion
in the policy that prevents GIF from recovering crane rental expenses for the
maximum amount of the aggregate total of the sublimits contained in the policy.
To support its position that the crane rental expenses should not be
limited to the $450,000 coverage sublimit contained in the Rental
Reimbursement endorsement, GIF contends that, during the claims adjustment
period, Mr. Crow, National Union’s claims adjuster, represented to GIF that its
rental reimbursement expenses could be covered by other provisions in the policy
such as the Business Interruption expenses provision and the Extra Expenses
provision. GIF also points to the Reservation-of-Rights letters issued by
National Union instructing GIF to mitigate its damages resulting from the
accident, noting that neither of the letters mentions the $450,000 coverage
sublimit in the Rental Reimbursement endorsement.
National Union counters that the 2008-09 policy (as reformed) is clear and
unambiguous so it should be enforced as written thereby limiting GIF’s total
reimbursement for crane rental expenses to the $450,000 coverage sublimit
contained in the Rental Reimbursement endorsement. National Union argues
that interpreting the policy otherwise would undermine the purpose of sublimits
because all sublimits fall under broader categories of coverage and are created
specifically to narrow the scope of coverage provided in those broader categories.
We agree.
A plain reading of the policy indicates that the Rental Reimbursement
endorsement was intended by the parties to be the sole source of coverage for all
rental reimbursement claims advanced by GIF. Had the parties intended for
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other provisions of the policy to cover rental reimbursement expenses, it would
have been unnecessary to have a separate Rental Reimbursement endorsement
in the policy at all. Additionally, the Rental Reimbursement endorsement
contains specific language and restrictions governing GIF’s procurement and use
of rental equipment pursuant to the policy. This narrow and specific language
is only contained in the Rental Reimbursement endorsement and is not
contained in any other provision in the policy, including the Business
Interruption expenses and Extra Expenses sections, neither of which mention
the phrase “rental reimbursement.” Consequently, it is clear that the parties
intended for the Rental Reimbursement endorsement to be the sole source of
coverage for GIF’s rental reimbursement claims. Since GIF does not dispute the
$450,000 sublimit on the Rental Reimbursement endorsement, the district court
did not err in holding that GIF’s reimbursement claims for the crane rental
expenses were limited to that amount under the policy.
GIF submits the alternative argument that its interpretation of the policy
as containing multiple coverages by multiple sublimits for rental reimbursement
expenses is reasonable. Thus, even if National Union’s conflicting interpretation
of the policy is also reasonable, there exists an ambiguity in the policy which
must be resolved in favor of providing coverage for GIF. We are not persuaded
by this argument.
For the reasons previously stated, the only reasonable interpretation of the
policy is that the Rental Reimbursement endorsement was intended by the
parties to be the sole source of coverage for GIF’s rental reimbursement claims.
Consequently, the policy is not susceptible to more than one reasonable
interpretation and is not ambiguous as a matter of law. See La. C.C. art. 2056;
Cadwallader, 848 So. 2d at 580.
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III.
For the foregoing reasons, we AFFIRM the district court’s summary
judgment in favor of National Union Fire Insurance Company and against Gulf
Island Fabrication, Inc., dismissing its counterclaims in all respects.
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